Dombrowski v. United States

• Decision Date: 18 May 2020
• Docket Number: Case No. 18-11615
• Citation: 461 F.Supp.3d 575
• Parties: Laura DOMBROWSKI, Plaintiff/Counterclaim Defendant, v. UNITED STATES of America, Defendant/Counterclaim Plaintiff.
• Court: U.S. District Court — Eastern District of Michigan

461 F.Supp.3d 575

Laura DOMBROWSKI, Plaintiff/Counterclaim Defendant,

v.UNITED STATES of America, Defendant/Counterclaim Plaintiff.

Case No. 18-11615

United States District Court, E.D. Michigan, Southern Division.

Signed May 18, 2020

Daniel W. Weininger, Southfield, MI, Jerry R. Abraham, Abraham and Rose, Farmington Hills, MI, for Plaintiff/Counterclaim Defendant.

James Strandjord, U.S. Department of Justice, Washington, DC, for Defendant/Counterclaim Plaintiff.

OPINION AND ORDER GRANTING IN PART AND DENYING IN PART PLAINTIFF'S MOTION FOR SUMMARY JUDGMENT AND DENYING DEFENDANT'S MOTION FOR SUMMARY JUDGMENT

ROBERT H. CLELAND, UNITED STATES DISTRICT JUDGE

Plaintiff Laura Dombrowski brings this quiet title action against Defendant United States of America under 28 U.S.C. § 2410(a)(1) for property on which Plaintiff resides and to which she has legal title. (ECF No. 1.) Defendant asserts Plaintiff's property is subject to a federal tax lien. Defendant counterclaims under 26 U.S.C. § 7403(a) to enforce its lien. (ECF No. 5.)

Plaintiff has lived with Ronald Matheson since 2006. Matheson has accumulated substantial debts to the federal government, and Defendant seeks to collect some of the amounts owed, and filed a lien on Plaintiff's property. Plaintiff moves for summary judgment of her claim to invalidate the lien. (ECF Nos. 31, 32.) Defendant moves for summary judgment on its counterclaim to enforce the lien. (ECF No. 30.) The matter has been thoroughly briefed. (ECF Nos. 35, 36.) The court finds a hearing unnecessary, and for the reasons provided below, the court will grant in part and deny in part Plaintiff's motion and deny Defendant's motion. E.D. Mich. L.R. 7.1(f)(2).

I. BACKGROUND

The following facts are taken from the record established by both parties. Each fact is either agreed upon or lacks contradictory evidence.

Plaintiff and Matheson have lived together since 2006. (ECF No. 30, PageID.258, ¶ 1; ECF No. 32, PageID.517, ¶ 1.) They are not married. (ECF No. 30, PageID.258, ¶ 1; ECF No. 30-1, PageID.292; ECF No. 32, PageID.517, ¶ 1.)

In July 2006, Plaintiff lent Matheson $171,000. (ECF No. 30, PageID.259, ¶¶ 5-7; ECF No. 30-1, PageID.297-98; ECF No. 32, PageID.517, ¶¶ 5-7.) The amount constituted the entirety of Plaintiff's retirement account. (ECF No. 30, PageID.259, ¶ 5; ECF No. 30-1, PageID.297-98; ECF No. 32, PageID.517, ¶ 5.) The loan was short-term; Matheson promised to pay it back within months. (ECF No. 30-1, PageID.297-98; Defendant's Exhibit 2, Page 25.) One year later, in July 2007, Matheson gave Plaintiff a promissory note for the loan, backdated to July 2006 and providing for 100% interest. (ECF No. 30, PageID.259, ¶ 9; ECF No. 32, PageID.517, ¶ 9; ECF No. 33, PageID.601.)

Around the same time as Plaintiff's loan in July 2006, Plaintiff's brother loaned Matheson $172,000 at an interest rate of 100%. (ECF No. 30, PageID.260, ¶ 11; Defendant's Exhibit 2, Page 44; ECF No. 33, PageID.607; ECF No. 32, PageID.518, ¶ 11.)

Later in 2006, Plaintiff again loaned Matheson money. She wrote Matheson a check for $50,000 and wrote the word "loan" in memo line. (ECF No. 30-1, PageID.319; ECF No. 33, PageID.611.)

In October 2007, Matheson wrote checks to Plaintiff and her brother to pay off the loans. (ECF No. 30, PageID.260, ¶ 12; ECF No. 30-3, PageID.384, 86; ECF No. 32, PageID.518, ¶ 12.) Matheson gave the checks to Plaintiff and instructed her not to cash them. (ECF No. 30, PageID.260, ¶ 15; Defendant's Exhibit 2, Page 41; ECF No. 32, PageID.518, ¶ 15.) Matheson indicated that he had no money to pay the check amounts. (ECF No. 30, PageID.260, ¶ 15; Defendant's Exhibit 2, Page 41; ECF No. 32, PageID.518, ¶ 15.)

Both Plaintiff and Plaintiff's brother continued to loan Matheson money. In November 2007, Plaintiff's brother made a $10,000 loan to Matheson. (ECF No. 30, PageID.260, ¶ 16; ECF No. 30-11, PageID.475; ECF No. 32, PageID.518, ¶ 16.) In December 2010, Plaintiff loaned Matheson $10,600. (ECF No. 30, PageID.260-61, ¶ 17; ECF No. 30-1, PageID.297; ECF No. 32, PageID.519, ¶ 17.)

During the course of these events, Matheson steadily amassed substantial debt to the federal government. Matheson incurred income tax liabilities for tax years 2001, 2003, 2004, 2007, and 2010. (ECF No. 30, PageID.261, ¶ 18; ECF No. 32, PageID.519, ¶ 18.) From 2009 to 2012, Matheson was in litigation with the Internal Revenue Service ("IRS") to contest his income tax deficiencies. (ECF No. 30, PageID.261, ¶¶ 19-23; ECF No. 32, PageID.519, ¶¶ 19-23.) By 2011, Matheson had self-reported over $1,250,000 in tax liabilities on his tax return. (ECF No. 30, PageID.261, ¶ 22; ECF No. 32, PageID.519, ¶ 22.) He submitted an offer-in-compromise to settle all his tax debts on April 10, 2013. (ECF No. 30, PageID.262, ¶ 24; ECF No. 32, PageID.519, ¶ 24.) The IRS rejected the offer. (ECF No. 30, PageID.262, ¶ 24; ECF No. 32, PageID.519, ¶ 24.) Matheson's tax liabilities now stand at $3,237,039.91. (ECF No. 30, PageID.262, ¶ 18; ECF No. 32, PageID.519, ¶ 18.)

In the spring of 2013, Matheson defaulted on the mortgage for his residence. (ECF No. 30, PageID.262, ¶ 28; ECF No. 32, PageID.519, ¶ 28.) Both Plaintiff and Matheson resided on the property. (ECF No. 30, PageID.258, ¶ 4; ECF No. 32, PageID.517, ¶ 4.)

On June 25, 2013, Matheson transferred $220,000 to Plaintiff. (ECF No. 30, PageID.262, ¶ 29; ECF No. 32, PageID.519, ¶ 29.) That same day, Matheson transferred $80,000 to Plaintiff's brother. (ECF No. 30, PageID.262, ¶ 30; ECF No. 32, PageID.519, ¶ 30.) Both Plaintiff and Plaintiff's brother claim the amounts were partial repayments for their loans made to Matheson in the past. (ECF No. 30-11, PageID.483; ECF No. 32, PageID.519, ¶ 29.)

On June 27, 2013, Plaintiff's brother gave Plaintiff the $80,000 he received from Matheson. (ECF No. 30, PageID.262, ¶ 31; ECF No. 32, PageID.520, ¶ 31.) On July 10, 2013, Plaintiff purchased a house. (ECF No. 30, PageID.263, ¶ 32; ECF No. 32, PageID.520, ¶ 32.) The cost of the property was $229,990.98. (ECF No. 30, PageID.263, ¶ 32; ECF No. 32, PageID.520, ¶ 32; ECF No. 33, PageID.636.) Plaintiff received a warranty deed in her name. (ECF No. 30, PageID.263, ¶ 32; ECF No. 32, PageID.520, ¶ 32; ECF No. 33, PageID.634.)

Since at least October 1, 2013, Matheson has resided with Plaintiff on the property. (ECF No. 30, PageID.263, ¶ 34; ECF No. 32, PageID.520, ¶ 34.)

In July 2017, the IRS placed a lien on Plaintiff's property. (ECF No. 33, PageID.638.) Plaintiff brought this action for quiet title to the property and asked the court to hold the lien invalid. (ECF No. 1, PageID.4-5.) The IRS argued that Plaintiff assisted Matheson in tax evasion and sought to collect its debts. It counterclaimed to enforce the tax lien. (ECF No. 5, PageID.22-25.)

II. STANDARD

To prevail on a motion for summary judgment, a movant must show—point out—that "there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(a). First, the moving party bears the initial burden of presentation that "demonstrate[s] the absence of a genuine issue of material fact." Celotex Corp. v. Catrett , 477 U.S. 317, 323, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). There is no requirement, however, that the moving party "support its motion with [evidence] negating the opponent's claim." Id. (emphasis removed); see also Emp'rs Ins. of Wausau v. Petrol. Specialties, Inc. , 69 F.3d 98, 102 (6th Cir. 1995).

Second, "the nonmoving party must come forward with ‘specific facts showing that there is a genuine issue for trial.’ " Matsushita Elec. Indus. Co. v. Zenith Radio Corp. , 475 U.S. 574, 587, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986) (emphasis removed) (quoting Fed. R. Civ. P. 56(e) ). This requires more than a "mere existence of a scintilla of evidence" or " ‘[t]he mere possibility’ of a factual dispute." Anderson v. Liberty Lobby, Inc. , 477 U.S. 242, 252, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986) ; Mitchell v. Toledo Hosp. , 964 F.2d 577, 582 (6th Cir. 1992) (quoting Gregg v. Allen-Bradley Co. , 801 F.2d 859, 863 (6th Cir. 1986) ). For a court to deny summary judgment, "the evidence [must be] such that a reasonable jury could return a verdict for the nonmoving party." Anderson , 477 U.S. at 248, 106 S.Ct. 2505. All reasonable inferences from the underlying facts must be drawn "in the light most favorable to the party opposing the motion." United States v. Diebold, Inc. , 369 U.S. 654, 655, 82 S.Ct. 993, 8 L.Ed.2d 176 (1962) ; Moran v. Al Basit LLC , 788 F.3d 201, 204 (6th Cir. 2015).

III. DISCUSSION

Defendant supports its lien under state law, as is required. Defendant relies on Matheson's tax debts to assert a property interest over Plaintiff's home. Although federal law governs income tax liabilities, state law determines the property interests of taxpayers upon which tax liabilities attach. "In the application of a federal revenue act, state law controls in determining the nature of the legal interest which the taxpayer had in the property." United States v. Nat. Bank of Comm. , 472 U.S. 713, 722, 105 S.Ct. 2919, 86 L.Ed.2d 565 (1985) (quoting Aquilino v. United States , 363 U.S. 509, 513, 80 S.Ct. 1277, 4 L.Ed.2d 1365 (1960) ). "Once it has been determined that state law creates sufficient interests in the taxpayer to satisfy the requirements of the statute, state law is inoperative, and the tax consequences thenceforth are dictated by federal law." Id. (quoting United States v. Bess , 357 U.S. 51, 56-57, 78 S.Ct. 1054, 2 L.Ed.2d 1135 (1958) ); Hatchett v. United States , 330 F.3d 875, 881 (6th Cir. 2003) (quoting United States v. Craft , 535 U.S. 274, 278, 122 S.Ct. 1414, 152 L.Ed.2d 437 (2002) ) (analogizing property interests to a "bundle of sticks" and reasoning: "State law determines only which sticks are in a person's bundle.").

Defendant asserts three theories in support of its lien on Plaintiff's property. It argues Matheson's transfer of $300,000 on June 17, 2013 violates Michigan's Uniform Voidable...